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3 Corporate strategy and structure
If one does not know to which port one is sailing, no wind is favourable.
Seneca (ca 4 BC–AD 65), Roman philosopher, statesman and dramatist
Strategy and planning
Strategy and planning begins with analysis, and a well-
known tool to do this is a SWOT analysis (looking at the
internal Strengths and Weaknesses of the company, and the
external Opportunities and Threats). Planning itself can be
categorized into two main types depending on the time-
scale and purpose of the planning.
● Strategic planning is concerned with the longer term and
‘the big picture’. It is the process of defining the
company’s mission, determining the overall goals of the
organization and allocating resources to reach those
goals. It is done by top and middle managers.
● Operational planning is concerned with translating the
general, long-term goals into more specific, concrete
objectives. It involves monitoring the day-to-day work of
departments. It is done by middle and supervisory
managers.
Company structure
Having decided on its strategy, a business needs to
organize itself into a structure that best suits its objectives.
This can be done in several ways.
● Organization by function. The company is divided into
departments such as production, finance, marketing,
human resources.
● Organization by product. The company brings together
staff who are involved in the same product line.
● Organization by customer type. The company is
organized around different sectors of the market. Large
customers are called ‘key accounts’.
● Organization by geographical area. The company is
organized according to regions.
A large multinational may use several of the above: for
example a functional division initially (at an international
level), then a national structure for each country, and
within this some level of division according to customer
types.
The business must also decide on the best way to organize
its management hierarchy (= chain of command). The
company is run by top (= senior) managers with job titles
such as: Chief Executive Officer (CEO), Chief Operating
Officer (COO), and a series of Vice-Presidents or Directors
of different departments. Top management set a direction
for the organization and aim to inspire employees with
their vision for the company’s future. This vision is often
written down in a mission statement.
14 Further information http://knowledge.wharton.upenn.edu (> Strategic Management)
The next level is middle management, where managers are
in charge of (AmE head up) a department, division, branch,
etc. Middle managers develop detailed plans and
procedures based on the firm’s overall strategy.
Finally there is supervisory (AmE first-line) management,
and typical job titles are: Supervisor, Team Leader, Section
Chief. Supervisory managers are responsible for assigning
non-managerial employees to specific jobs and evaluating
their performance. They have to implement plans
developed higher up the hierarchy.
In some companies – or for specific projects – there can be a
matrix structure with cross-functional teams. Here
employees from different parts of the organization work
together and bureaucracy is reduced.
Above everything there is the Board, chaired by a
Chairman or President, which gets involved in ‘big picture’
strategic planning and meets perhaps once a month. The
CEO will be on the Board, but most Board members are not
involved in running the company – they are elected by and
responsible to the shareholders. Their main interest is
shareholder value: getting a good return on investment in
terms of both dividend payments and a rising share price.
Centralization vs Decentralization
A key issue for the company is to decide on the degree of
centralization. Should authority be kept at Head Office
(centralization)? If so, this would mean:
● A strong corporate image.
● Decisions made by experienced managers who see the
whole picture, not just one part of the business.
● Standardized procedures which could lead to economies
of scale (lower costs) and simpler distribution channels.
But decentralization also has advantages:
● Lower-level managers are more familiar with local
conditions and can therefore give a stronger customer
focus.
● The delegation of decision-making is likely to lead to a
higher level of morale at the grassroots.
There are other closely-related questions. Should the
structure be ‘vertical’, with many layers of management, or
‘flat’, with fewer layers? And how many subordinates
should each manager supervise?
● www.1000ventures.com (> Strategies)
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3 CORPORATE STRATEGY AND STRUCTURE

● www.tutor2u.net (> Revision Notes/Strategy) ● www.quickmba.com (> Strategy) ● www.netmba.com (> The Strategic Planning Process) 15
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3 Corporate strategy and structure: Exercises

3.1 Fill in the missing letters. 3.4 Pairs of words in bold have been switched – one
1 Inside a company, large customers are often referred to as from each column. Put them back in their correct places.
‘k_ _ a_ _ _ _ _ _s’. 1 market channel 7 core growth
2 COO stands for ‘C_ _ _f O_ _ _ _ _ _ _g O_ _ _ _ _r’. 2 cost value 8 distribution research
3 A matrix structure brings together people from different 3 earnings business 9 mission needs
parts of the organization to work as c_ _ _ _- 4 management loyalty 10 market portfolio
f_ _ _ _ _ _ _ _l t_ _ _s. 5 customer statement 11 shareholder centre
4 The delegation of decision-making is likely to lead to a 6 product share 12 brand hierarchy
higher level of morale at ‘the gra_ _ _oots’ (= the ordinary
people in an organization rather than its leaders). 3.5 Which of the collocations in exercise 3.4 refer to:
5 Each manager supervises a number of sub_ _ _ _ _ _ _ _s. 1 using a questionnaire to carry out a survey
6 In relation to an existing market, the ‘big picture’ strategy market research
can be one of dev_ _ _ _ _ _nt (growth), 2 the main activity of a company that generates most of its
conso_ _ _ _ _ion (making the existing situation stronger), profits
or wi_ _ _ _ _wal (leaving the market completely). 3 financial benefits (= increase in share price and dividends)
for the owners of the company
3.2 Complete each phrase 1–10 with an ending a)–j).
4 the whole range of products that a company sells
1 Operational planning translates general goals
2 It is usual to divide an organization
5 when customers are faithful to a particular product
3 Some companies are organized according
4 The Board gets involved
6 a business unit that spends money but does not generate
5 Senior managers set
revenue
6 Middle managers develop detailed plans based
7 First-line managers implement plans 7 a continuing increase in profits
8 First-line managers are also responsible 8 what is shown in an organigram (= organization chart)
9 A cross-functional team brings
10 Subordinates work 9 senior management’s vision for the company

a) a direction for the company.

10 how a product gets from the manufacturer to the end-
b) developed higher up the hierarchy.
user
c) for assigning employees to specific jobs.
d) in major strategy issues. 3.6 Match the verbs in the box with their definitions
e) into functional departments. below. Be careful – some are very similar.
f) into more concrete objectives.
g) on the overall strategy. adapt assign check control coordinate
h) to geographical regions. determine ensure evaluate implement monitor
i) together staff from different parts of the company. 1 make sure that everything is correct or the way you
j) under the supervision of a first-line manager. expect it check
3.3 The mixed-up letters make words that describe 2 organize people so that they work together effectively
departments or functional areas inside a company. Put
the letters in the right order. 3 give someone a job to do
1 haumn rruoeecss 9 pdroctoiun 4 carry out; make a plan start to work
2 cmoesutr scrieevs 10 lgael 5 have the power to make decisions; make something
3 qtuialy crotnol 11 siihnppg operate in the way that you want
4 rsaceerh and dvnolpmeeet 12 facnine 6 make certain that something happens
5 pbiluc rnotilaes 13 metakrnig 7 change something to fit a new situation
6 pejcrot mmeegnnaat 14 atnccous 8 watch or measure something carefully for a period of
time to see how it changes
7 aiiisdttrnmaon 15 pasuirchng (= buying, BrE)
9 (formal) think about or test something before deciding its
8 bnlliig 16 pcroenremut (= buying,
value, suitability or effectiveness
AmE)
10 (formal) control what something will be; officially decide
something; find out
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3 CORPORATE STRATEGY AND STRUCTURE

3.7 Use the words in the box to complete the SWOT 3.8 Look back at the completed SWOT analysis in
analysis below. exercise 3.7 and find a word that means:
alliance barriers climate debt depth one-stop 1 a situation in which you do not have enough of something
outdated overhead range shortage start-up
state-of-the-art tailor-made transfer workflow 2 depending too much on something
3 ‘sales staff’ (the answer is a short form of a longer word)

Strengths (strong points, internal) 4 a building used for a particular purpose (especially for
■ a large market share manufacturing)
■ a well-structured distribution network 5 when everyone who wants the product already has it
■ motivated and well-trained staff
1
■ (= cutting edge) products
2 3.9 Tick (✓) the one statement that is true.
■ (= customized / personalized)
products 1 Targets and goals tend to be more general. Objectives and
■ all services provided in one place: a aims tend to be more specific, with aims being the most
‘3 shop’ concrete and measurable.
■ a well-known, high-value brand 2 Aims and goals tend to be more general. Objectives and
Weaknesses (weak points, internal) targets tend to be more specific, with targets being the
■ a lack of new products most concrete and measurable.
■ a lack of managerial 4 (= amount
3.10 Managers should make sure that business
of knowledge and experience)
5 objectives are SMART. Can you remember what these
■ (= old fashioned) production
letters stand for? Don’t look back at the mind map until
methods
you have tried to think!
■ high levels of 6 (= money owed to
banks and other creditors) Sp_ _ _ _ _c, Mea_ _ _ _ _le, Ag_ _ _d,
■ slow 7 (= progress of work done) Rea_ _ _ _ic, and Ti_ _-specific
due to inflexible procedures
■ an over-reliance on a limited 8 of
products
■ high direct costs (= production costs) and high
indirect costs (9 eg utility bills)
Opportunities (future chances in the market)
■ new foreign markets
■ an improving economic 10
■ outsourcing
■ a key supplier who might want to make a strategic
11

■ new product ideas: either from market research or

from sales reps talking directly to customers Discussion topics
1 Bosses just take the credit for the work of lower-level
Threats (future dangers in the market)
employees. Who needs them?
■ greater competition Agree Disagree
■ low-cost production in Southeast Asia
■ technology 12 to Southeast Asia 2 The continual emphasis on shareholder value in
(so that low-cost countries start using high-tech American-style companies produces high levels of stress
equipment) amongst employees and an inability to think about the
■ high 13 costs of a new facility longer term.
■ political risk: regulation, taxes, trade Agree Disagree
14
(eg quotas and tariffs) 3 Think of two companies operating in the same market
■ the market approaching saturation (eg Coke and Pepsi, Yahoo and Google, Audi and
■ possible 15 of components or raw BMW, Gucci and Armani). Compare their strategies.
materials 4 Make a quick SWOT analysis for a company / country /
■ reduced pricing power due to merger of two city / educational institution that you know. Present it to
important customers some colleagues and ask for questions.

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